MomentumOptions.com Pre-Market Update for 12/20/2022
Bears Get Fourth-Straight Win
8:00am (EST)
The stock market extended its losing streak to four-straight sessions with the major indexes hitting fresh monthly lows. The losses also keeps a retest to the November lows intact, as well as, the 52-week lows from October.
The Nasdaq went out 10,546 (-1.5%) with the afternoon low at 10,497. Key support at 10,500 was breached but held. A close below this level would imply additional weakness to 10,400-10,250 with the October 13th 52-week low at 10,088.
The Russell 2000 settled at 1,738 (-1.4%) after trading down to 1,733. Early November and key support at 1,750 failed to hold. Continued closes below this level keeps downside pressure towards 1,725-1,700 in focus. Below is a chart of the IWM.
The S&P 500 tested a low of 3,800 before finishing at 3,817 (-0.9%). Key support from early November at 3,800 was touched and held. A drop below the latter would imply weakness to 3,750-3,700 with the early November low at 3,698.
The Dow closed at 32,757 (-0.5%) following the pullback to 32,581. Upper support 32,750-32,500 was breached but held for the second-straight session. A close below the latter and the 50-day/ 200-day moving averages would be a bearish development for a further slide towards 32,250-32,000.
Volatility Index
The Volatility Index (VIX) was down for the second-straight session with the low reaching 21.61. Upper support at 22-21.50 was triggered but held. A close below the latter would imply weakness towards 20.50-20.
Lowered resistance is at 23-23.50.
Market Analysis
The iShares Russell Growth 1000 ETF (IWF) fell for the fourth-straight session after tapping a low of $214.08. New and lower resistance at $214.50-$214 was tripped but held. A close above the latter would indicate downside action to $212.50-$212.
Resistance is at $218-$218.50.
RSI (relative strength index) remains in a downtrend with key support at 40 failing to hold. Continued closes below this level would suggest weakness towards 35-30 and levels from the first half of October. Resistance is at 45-50.
Sector
The iShares PHLX Semiconductor ETF (SOXX) was also down for the fourth-straight session with the bottom tapping $353.75. Fresh and upper support at $354-$353.50 was breached but held. A drop below the latter would imply additional weakness to $351.50-$350.
Resistance is at $362-$362.50.
RSI is in a downtrend with upper support at 45-40 holding. A fade below the latter would signal downside action towards 35-30 and levels from early October. Resistance is at 50-55.
Market Outlook
The RSI levels for the major indexes are between the 35-40 range and just above oversold conditions. I’m expecting RSI to push the 30 level across the board, and possibly the mid to high 20’s over the near-term. This would likely confirm the November lows being taken out, possibly this week.
There could be a Christmas “rally” afterwards based on those support levels holding that would likely last into the New Year. As a reminder, Santa gains typically occur the last five trading days of the year and includes the first, if there is one.
From there, fourth-quarter earnings season will start the second-week of January and will likely dictate how the month of January unfolds.
Momentum Options Play List
Closed Momentum Options Trades for 2022: 25-22 (53%). All trades are dated and time stamped for verification. New subscribers can look at the past history to see how the trades have played out or to research our Track Records. Do not risk more than 5% of your trading account on any one trade but do try to take all of the trades.
Please remember, all “Exit Targets” and “Stop Targets” are targets. You should not have any “Stops” entered to close any trades or “Limit Orders” in your brokerage account unless I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the Daily updates and Text Alerts.
Intel (INTC, $26.79, down $0.13)
INTC January 26 puts (INTC230120P00026000, $0.75, unchanged)
Entry Price: $0.85 (12/16/2022)
Exit Target: $1.70
Return: -12%
Stop Target: None
Action: Upper support at $26.50-$26.25 held on the session low. Lowered resistance is at $27-$27.25.
Cisco Systems (CSCO, $47.40, down $0.41)
CSCO January 47 puts (CSCO230120P00047000, $1.20, up $0.15)
Entry Price: $0.95 (12/15/2022)
Exit Target: $1.90
Return: 27%
Stop Target: 97 cents (Stop Limit)
Action: Set a Stop Limit at 97 cents to start protecting profits and to avoid a loss.
Monday’s low touched $47.14 with the calls peaking at $1.33. Upper support at $47.25-$47 was breached but held. Lowered resistance is at $47.50-$47.75.
DraftKings (DKNG, $11.66, down $0.46)
DKNG January 12.50 puts (DKNG230120P00012500, $1.40, up $0.15)
Entry Price: $0.70 (12/6/2022)
Exit Target: $1.40, raise to $2.10
Return: 100%
Stop Target: 95 cents, raise to $1.05 (Stop Limit)
Action: Raise the Exit Target from $1.40 to $2.10. Raise the Stop Limit at 95 cents to $1.05 to further protect profits.
Shares tapped a low of $11.98 with early November and upper support at $12-$11.75 getting breached but holding. Lowered resistance is at $13-$13.25.